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Wage theft puts woman at "rock bottom" — and she’s not alone

Labour ministry fails to collect on wages legally owed Ontario workers, including the $3,500 Chelsea Phelan-Tran’s employer refused to pay her in 2012.

Chelsea Phelan-Tran was thrilled to get a job at a Toronto publisher after graduating with a large student debt, but when she stopped getting paid, petitions to her boss and eventually the Ministry of Labour went nowhere. She and her husband are still trying to get their finances rebalanced after going into debt.
(Lucas Oleniuk / Toronto Star)

It was December 2012, and desperation was beginning to creep into Chelsea Phelan-Tran’s politely worded emails.

“I have three months of bills with interest piling up,” the expectant mother wrote her former boss. “It also doesn’t help that Christmas is around the corner and taking every extra penny I have.”

Phelan-Tran ended the message with a smiley face, sending her best wishes to the woman who owed her $3,500 in wages. She never heard back.

Two-and-a-half years later, she is still waiting, even after the Ministry of Labour ruled she was legally owed the money. But the ministry still hasn’t managed to collect it, and appears to no longer be trying.

“It’s money that I deserve, it’s money I worked hard for,” says Phelan-Tran. “It’s heartbreaking that this how our government is treating us.”

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Last year, 63 per cent of all orders to pay issued to employers by the Ministry of Labour went uncollected, according to figures requested by the Star.

Critics say that indicates a weak enforcement system that lets wage-owing employers off the hook while giving up on out-of-pocket workers.

“Because it happens so often, some of the workers will tell me they’re just not going to bother to file a claim next time,” says lawyer Avvy Go, of the Metro Toronto Chinese & Southeast Asian Legal Clinic. “They have so little faith in the system. They see the government as failing them.”

That is how Phelan-Tran sees it. In June 2012, she landed her dream job at Toronto-based book publisher McArthur & Company, run by award-winning entrepreneur Kim McArthur. Phelan-Tran, who owed $38,000 in student loans, was thrilled.

But by September, she was no longer being paid. For two months she worked for nothing, hoping things would turn around at the increasingly beleaguered business.

But loyalty didn’t pay the bills. She says she and her husband went $10,000 into debt that fall trying to stay afloat on one income, even as they were expecting their first child.

“We were at rock bottom,” she says.

Phelan-Tran felt she had no other option than to approach the ministry. But rather than resolve the issue, that sparked a further round of waiting and worrying.

According to ministry documents, McArthur “could not be located,” and it took until Aug. 22, 2013, to hold a fact-finding meeting on Phelan-Tran’s file. McArthur did not attend.

By that time, the publishing company had closed. But the ministry ruled that Phelan-Tran was still owed $3,500 and issued an order for McArthur to pay. The matter was sent to a private collection agency, and for a year, Phelan-Tran heard nothing.

Losing patience, she called the agency herself. The collection agent said she too had failed to locate the employer, at which point Phelan-Tran provided McArthur’s phone number and home address herself.

“She was like, 'Oh, you have that?” Phelan-Tran recalls.

Last month, having received no update, she called the ministry and was told the collection agency had been unsuccessful. The file had been returned to the ministry. Although there are no time limits on collections, and employers remain liable for unpaid wages, files returned from the collection agency are essentially dead in the water.

“If new information on the employer/director comes to the Ministry of Labour’s attention, the file may be sent back to the collector to pursue collections,” said a statement to the Star.

It is not clear what “new information” is needed to galvanize the process. The ministry does not appear to have deployed any of the collection tools at its disposal, including filing a copy of the order to pay in court and seizing bank accounts and other assets. Its only action has been to add a $350 fine to the uncollected wages.

The Star located McArthur’s phone number, email and home address. She did not respond to multiple requests for comment, and did not answer the door of her Brantford house — where her 2001 Canadian Women Entrepeneur of the Year award leaned against the front window.

According to a June 2014 Facebook post, McArthur has a new publishing outfit called McArthur McKim. Meanwhile, Phelan-Tran and her husband are delaying a second baby while they rebalance their finances.

“It’s a criminal act that she committed. She broke the law,” says Phelan-Tran. “She could just do it again and get away with it.”

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POSSIBLE SOLUTIONS

Here’s how the province could ensure more workers get the wages they’re owed:

Establish a wage protection fund

The province used to maintain a $175-million wage protection fund. Employees could apply to receive up to $5,000 in unpaid wages when their bosses went bankrupt. That was scrapped by former premier Mike Harris's Conservative government. Lawyer Avvy Go says reviving it would provide at least one additional protection for workers, who are too often forced to “eat the loss.”

Greater liability

Go has acted in several high-profile cases where businesses declare bankruptcy, refuse to pay workers’ wages, and then set up an almost identical company. The Employment Standards Act is fuzzy on so-called “related employer” provisions and should be strengthened to hold bosses accountable.

“It doesn’t matter what the name of the company (is). If they know it’s the same guy doing the same thing, then (they) should be able to go after them," says Go.

Better inspections

The Ontario Ministry of Labour should focus on deterring wage theft through more unannounced inspections and heftier penalties for violations. That, says Go, could help finance a wage protection fund.

“You have to attach more severe consequences to the breaches and use more (investigative) kind of powers.”

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